University of New York in Prague School of Business
Bachelor of Business Administration Program
FINAL PROJECT
Recommendation of Marketing Communication Strategy in the Czech Market
Author: Thao Quynh Nguyenová
(515750)
2019 Mentor: Ing. Jaroslav Halík, MBA, PhD.
Acknowledgement I would like to express great gratitude to my mentor Jaroslav Halík for the guidance and assistance with writing my thesis. Also, I would like to thank my family and friends who have been supportive throughout my study.
Abstract This thesis determines the communication strategy in the Czech Republic for Korean skincare company, Laneige, which is owned by the big corporation Amorepacific. The company recently entered the European market and have not promoted its brand, therefore this thesis will provide the communication tools to reach the target audience, to increase brand awareness and recognition. The final strategy was concluded from primary research by the distribution of surveys to sample population in the chosen country to find customers’ product preferences, determine target segment and buying decision factors. The result of the thesis was supported by the identification of the current Amorepacific communication strategy in Asia and SWOT (strength, weakness, opportunity, threat) analysis which depicted the internal and external forces that can influence the business. Furthermore, the author used STP analysis which detects segments of the cosmetic industry, selects the adequate group of interest and compares the positioning of the brand with competitors. Lastly, the communication plan consists of defining its objectives, message, budget as well as choosing the most effective distribution channels, creating an annual calendar for application of each promotion tool, recommending tools for measuring and control after the implementation of the strategy.
Keywords: Amorepacific, Laneige, communication strategy, cosmetic industry, Korean skincare, Czech Republic
3 Table of Contents
INTRODUCTION...... 7
1 LITERATURE REVIEW ...... 8
1.1 COMPANY BACKGROUND ...... 8 1.2 AN OVERVIEW OF THE COSMETIC INDUSTRY ...... 9
1.3 MARKETING MIX ...... 9 1.3.1 Product ...... 10 1.3.2 Promotion ...... 10 1.3.3 Price ...... 10 1.3.4 Place ...... 11 1.3.5 People ...... 11 1.3.6 Process ...... 12 1.3.7 Physical evidence ...... 12 1.4 PROMOTIONAL MIX ...... 12 1.4.1 Advertising ...... 13 1.4.2 Sales Promotion ...... 14 1.4.3 Public Relation ...... 15 1.4.4 Personal Selling ...... 16 1.4.5 Direct Marketing ...... 17 1.5 SEGMENTATION, TARGETING AND POSITIONING MARKETING (STP) ...... 18 1.5.1 Segmentation ...... 19 1.5.2 Targeting ...... 20 1.5.3 Positioning...... 22
2 ANALYSIS OF MARKETING COMMUNICATION STRATEGY ...... 24
2.1 CURRENT COMMUNICATION STRATEGY OF THE COSMETIC INDUSTRY IN SOUTH KOREA ...... 24 2.2 SURVEY RESULTS...... 26 2.3 LANEIGE SEGMENTATION, TARGETING AND POSITIONING ...... 33
2.4 COMMUNICATION OBJECTIVES OF THE MARKETING PLAN IN CZECH REPUBLIC ...... 36 2.5 DEFINING MESSAGE AND CHOICE OF MEDIA ...... 36 2.6 SWOT ANALYSIS ...... 36 2.7 TOOLS AND CHANNEL SELECTION FOR MARKETING COMMUNICATION STRATEGY IN CZECH REPUBLIC 38
2.8 BUDGET AND CALENDAR ...... 44 2.9 MEASURING AND CONTROL ...... 46
CONCLUSION ...... 47
APPENDICES ...... 51
4
List of Figures Figure 1: Example of a Perceptual Map 23 Figure 2: Visualisation of Water Bar event 25 Figure 3: Answers to survey question: What is your age? 26 Figure 4: Answers to survey question: How much do you spend on skincare products monthly on average? 27 Figure 5: Answers to survey question: How much are you willing to spend? 28 Figure 6: Answers to survey question: Are you interested in skin care? 29 Figure 7: Answers to survey question: Do you have a skincare routine? 29 Figure 8: Answers to survey question: Based on what do you choose to buy cosmetic products? 31 Figure 9: Answers to survey question: What kind of product did you use? 32 Figure 10: Segments of the Cosmetic Market 33 Figure 11: Perceptual Map of Laneige 35 Figure 12: SWOT Analysis 37 Figure 13: Cost Structure of Communication Tools 44 Figure 14: Cost Structure of Communication Tools 45
5 List of Abbreviations STP Segmentation, Targeting, Positioning PPC Pay-per-click SEO Searching Engine Optimalization B2B Business to Business R&D Research and Development
6 Introduction
In recent decades, globalization is one of the most practical tools for independent economic prosperity. The integration and unification of cultures have led to higher living standards and provisional world peace. In the economy, globalization is the key to the growth of wealth because it creates an opportunity for businesses to expand and relocate their sources in different parts of the world. Therefore, to successfully penetrate a foreign market, understanding cultures and ways of communication are essential. Many companies, due to enlargement to a particular country, have to learn about its cultural identity to develop adequate business strategies which are in correlation with a target area. Every business development requires marketing which modifies its strategy based on culture. The part of marketing is to understand the needs and desires of a targeted group because this field is responsible for the brands’ awareness. A connection between sellers and buyers is crucial for gaining profits because it involves the recognition of customers preferences. Therefore, the marketing communication strategy is one of the divisions in marketing which examines the relationship of customers towards products and creates marketing methods that would attract potential customers. This thesis focuses on marketing communication strategy in the Czech Republic and examines the most effective communication strategy based on the distribution of survey concentrate on factors that influence buying decision. The chosen corporation is Amorepacific and its brand Laneige which is one of the most significant cosmetic leaders in Asia and its headquarter is located in South Korea. The goal of the thesis is to recommend the most appropriate way of a marketing communication strategy to Laneige in the Czech Republic which recently entered the European market. The research questions for the thesis are the following: How does the marketing communication strategy of the cosmetic industry in Asia differ from the European one? What are the targeted group of customers and positioning of the brand? What are the objectives of the communication strategy, message and choice of media? What kind of marketing communication strategies should Amorepacific use for the expansion to the Czech Republic? The methods used in this thesis are based on primary and secondary research. The primary analysis was distributed to the local sample population to find how they reach to final products and to identify adequate marketing communication strategies in the chosen country. The secondary research was examined through existing literature.
7 1 Literature Review
1.1 Company background
Amorepacific is a Korean personal care corporation which was established in 1945 by Amorepacific is a Korean personal care corporation which was established in 1945 by founder Suh Sung-whan. Their headquarter is located in the capital city of South Korea, Seoul. The initial product of Amorepacific was hair oil which was invented and produced by the founder's mother, since then the founder started to grow his company by creating new beauty products to extend the company‘s product catalogue. In the present, the company owns 26 brands in total which are categorized into beauty care, skin care, fragrances, inner beauty, green tea products, medical beauty cosmetics, hair, body and oral products. Each category has its own brand which is differentiated according to its specialization. This is because each brand offers and focuses on a different kind of product line and composition. (MarketLine, 2019) The company is one of the biggest beauty leaders in Asia and it had expanded to the majority of Southeast Asia countries. The vision of the company is "Making people all over the world beautiful with our own beauty that had existed before" and the mission is to "Beautify the World". (MarketLine, 2019 & Amorepacific, 2019) From these statements, it can be seen that the company attempts to achieve global recognition in the future and be the number one Beauty Creator. Currently, the company is in the process of expanding its business worldwide. In 2018, Amorepacific started to expand its brands to the US, Japan and Australia, which was the first step to the international market. In the beginning, the offices were opened in Dubai and Australia for observation of the local market in order to understand consumer behaviour and preferences. Furthermore, for expanding their products overseas, their business strategy is made up of partnering with local magazines, creating a new brand that fits the culture, and selling products through retail stores. For instance, the plan for the Australian market is to sell one of their brands, Laneige, at Sephora retail stores alongside their many other beauty brands. In addition, in the US, the company began to cooperate with Marie Claire fashion magazine where the products of the company are promoted. As a result, it raises the brand's awareness to the local citizens. (MarketLine, 2019) In Europe, Amorepacific has a perfume brand in their portfolio named Lolita Lempicka which was formulated by a collaboration with a fashion designer. Furthermore, the company had to hire marketing specialists and product managers in France in order to achieve success of this brand. The most significant reason for Amorepacific to choose this tactic is due to their
8 past loss. In the 1990s its Korean brand unsuccessfully entered the European market which resulted in a loss of investment. (Goldstein, 2007) In March 2019, the organization decided to launch their brand Laneige in Europe again and its products are available in Sephora retail stores as a result.
1.2 An Overview of the Cosmetic Industry
The beauty industry is the sector that is relatively growing due to the high importance of personal appearance nowadays and popularity among most of the female community. The products are designed to target women because by nature they tend to care about their beauty more to increase their confidence and search for reparations which can solve their insecurities. Cosmetics and personal care are divided into areas such as skincare, haircare, makeup, and fragrances. The most dominant segment of skincare is facial care which in Europe owns 70.7% of the market value. (MarketLine, 2019) The major leads of the cosmetic industry in Europe are L’Oreal and Estée Lauder. In this industry, it is more challenging to persuade customers to purchase the products due to the skepticism of side effects which can be immediately visible on the skin. Moreover, brand loyalty in this industry is relatively high due to the fear of trying a new product, therefore it is more challenging to convince customers to switch to a new product. This business is not the same as others such as fashion or car industry because it requires the direct application of the product on the skin while the other products are used as a personal accessory. Therefore, for cosmetic businesses, it is essential to have a store where buyers can obtain physical evidence in the form of product testing.
1.3 Marketing Mix
The marketing mix, also known as the P’s, are used in businesses mainly to promote brands and its products because it is the key part of business strategy. Furthermore, marketing analyses is the needs and wants of a group of interest which create a strategy to approach and satisfy the targeted group and develop new products. In the past, many economists omitted the marketing strategy and mostly focused on meeting the supply and demand as well as the production of products which was not enough for success. (Whalley, 2010) In comparison to other business fields, marketing is the youngest business unit that is studied and it was added into the academic curriculum in the 20th century. (Jones & Shaw, 2003) Due to the growth of technological advances, marketing is essential for businesses because technology is used in almost every part of our daily life and it is massively used in business for the creation
9 of awareness. In the beginning, the marketing mix only consisted of 4 P’s known as product, promotion, price and place. Subsequently, three additional aspects were added to the marketing mix called people, process and physical evidence. In the following section, the 7 P’s will be described more deeply.
1.3.1 Product
The most critical element for every company is to obtain a product that could be sold in the market because without a product, they would have nothing to offer to their customers. A company should create or sell a product that is in correlation with the demand of the market; therefore the choice of products or services should be carefully selected. Market research is a way for the determination of customer needs and wants to be found. Companies can offer its customer two types of products, tangible and intangible. The tangible aspect is a product that has a physical appearance such as clothing or electronics. On the other hand, a product that is intangible are services such as guided tour packages. For products to be successfully sold in the market, products that companies offer should correspond to adequate qualities to keep the highest customer retention rate. However, there are more elements which must be considered including design, packaging and reputation of the brand. All these essential features must belong to a product because several components, such as a product manual, must be in the packaging due to the regulation of business. (Baines and et al., 2017)
1.3.2 Promotion
The promotion tools or promotional mix create a relationship between a customer and a brand/product. Businesses use the promotion to approach their customers and create awareness of their brands. Furthermore, the purpose of this element is to persuade customers to purchase products. Brands/products are promoted through advertising, personal selling, direct marketing, sales promotion, public relation, interactive marketing, events and sponsorship marketing. Each type of promotion has its way of communicating with their customers. For a deeper understanding, these elements will be analysed later in section 1.4.
1.3.3 Price
The price defines the value of a product that a company sells and consists of profit margin and expenses of a company such as fixed costs and variable costs. Expenses for fixed costs are usually the same for each month, whereas, variable costs depend on the production output. These costs are always part of the price to cover all the expenses of a company. On the contrary,
10 the profit margin depends on a company’s determination of profit. However, competitors and customers are two other elements that are important when setting a price. Competition has to be taken into consideration even when a company has a competitive advantage because similar products could be sold at a lower price and if a company sets a price too high, then the company will lose customers to its competitors. Customers are also important during the process of setting prices because most consumers would prefer lower priced products to overpriced ones, therefore the price should always correspond to the quality of a product. Furthermore, the identification of a targeted group is essential due to the difference in the preferences of each social class. Companies use pricing mechanics to determine the value of a product at which it will be sold in the market. (Baines and et al., 2017)
1.3.4 Place
The place is a platform where products are distributed to customers, hence companies must choose a decent location for an active reaching of the target audience. Products should be available in a convenient place where customers can have access to purchase them. Therefore, companies should place their products into the most visible positions such as shopping centres, retail shops, drugstores and window shops where the products are more highlighted. In relation to stores, the ambience of a store is crucial because it leaves an impression on customers. Furthermore, mobile and computer devices are in advanced development which compels distributors to have an e-shop portal because online shopping is widespread. Many people buy off online shops to purchase products that are not sold in their local shops or due to its inexpensive home shipping which are offered by logistics companies. (Baines and et al., 2017)
1.3.5 People
By people, it is meant everyone who is involved and in contact with customers. The ones who communicate with customers are always salespersons, these people are the key to customer satisfaction. Not all people are suitable for working in the sales, therefore a firm's HR department should be careful with choosing an adequate candidate that would fit the position. Also, it is important to provide training for employees in order to learn soft skills and how to obtain customers' satisfaction. The main reason is that customers would leave a shop because of the poor customer service which subsequently could lead to negative reviews and feedbacks. Therefore, employees should be well trained and motivated to treat customers in the best way because customer service directly influences the reputation of a company. The attitude and
11 behavior of employees reflected on the sales more than the price of products. (Baines and et al., 2017)
1.3.6 Process
Currently, in Western economic prosperity, consumers are more interested in experiencing the process of buying products rather than its price. The process involves all the steps from the beginning of buying until the end. It is differentiated according to how customers purchase their products. The method of direct selling in a store has fewer procedures than an online store because there is less to complain. For in-store selling, the ambience of the store and employees are essential for the impression. On the other hand, purchasing on the website is more complicated due to nonphysical contact. In online shopping, customers judging their satisfaction mainly based on the speed and willingness of service such as length of shipping methods, speed and content of email replies and how returns and refunds are solved. In other words, the process is a procedure of how products are delivered to the final customer. (Baines and et al., 2017)
1.3.7 Physical evidence
The decision making for buying some products are more difficult than others because customers purchase products based on quality and material. Customers need physical evidence because it displays the real usage of a product and its quality. Many people prefer to buy in- store instead of online because customers can touch and test it immediately. On the other hand, websites can hardly be convincing due to the lack of proof that a product is identical to an uploaded picture. Therefore, the way to show these products could be only through video or customers' reviews who already had an experience with the products. Customers reviews are very important for the company because it serves as a proof for potential customers who are interested in buying the product as well as feedback for companies for making improvements in an eventual product defect. The physical evidence ensures that a company can be reliable and is not a scam. Besides the quality of products, many aspects are considered as physical evidence such as invoices, logo, business card, signature and others to show that a company exists and operates. (Baines and et al., 2017)
1.4 Promotional Mix
This part of the thesis disassembles an individual communication strategy. The objective of each promotion can be divided into one of the three phases such as brand awareness or
12 acquisition, customer retention and brand loyalty. In the early stage when the brand is new and aims to obtain customers, marketers use promotion such as advertising, sales promotion, personal selling events and sponsorship. After the audience knows about the brand, the next communication strategy is to persuade buyers to return to buy to achieve a high customer retention rate. The company should focus on customer service, direct marketing, public relation, personal selling and advertising to successfully keep the long relationship with customers. Personal selling and advertising should be part of the whole time stages due to its strong impact on the audience. Lastly, companies organise events, invest in sponsorship and provide sales promotion to find and target new segments and increase sales. (Ekhlassi, Maghsoodi & Mehrmanesh, 2012)
1.4.1 Advertising
Advertising is a non-direct way of communication between a brand and its targeted segments. For increasing awareness and knowledge of a product/brand, an organisation uses promotion tool such as mass media to deliver the message. It is important to determine the message of advertisements because it leaves an impression which can subsequently create a perception of an individual on a brand. A product/services could be advertised through television, radio, magazines or newspapers. This method of promotion is costly in comparison to other tools, therefore companies usually search for the sponsors who could fund it. There are several reasons of advertisement usage: announcing the group of interest about a new brand/product, changes and its functions; convincing the audience in choosing the brand; recalling the competitive advantage of the product and where it could be found. The budget for advertising is a big question for companies because this promotion is very expensive and the amount of cost is determined based on the type of product because some require more publicity, the amount and repetitiveness of the ads, size of market share and whether competitors are stronger in propagation. Thus, the distribution of budget should be formulated in advanced between other promotion tools because advertising through mass media requires the largest portion of the budget. To effectively promote the product, the advertising strategy should be planned in detail. As it was mentioned before, the message of the product is essential and has to be straightforward, catchy and easy to remember because of the possibility of investment loss of advertising due to the disinterest of the audience. Therefore, to achieve efficient outcomes, the message should be well established. Furthermore, an organisation has to choose the types of media that would be used for promoting their brand, decide on the time when the ad will be
13 aired, the number of targeted audiences and ad frequency. These are factors which companies should focus on during forming advertising procedures. In international advertising, marketers have to concentrate on many aspects such as culture, language, customs and traditions because of the language barrier and different cultural values that can negatively affect the promotion, costs and reputation of a brand. Also, regulations of a country should be in consideration to avoid the mistakes because the law differs from the state of origin. Therefore, an organization has to decide whether to use standardization or differentiation strategy for advertising. Standardization can be implemented in all countries and omits the culture and customs of other countries. The message, packaging and product remain the same and are created in a way that could be applied anywhere. This approach is simpler and less costly but could not be used in every country. Hence, it is used based on the business model such as B2B or if the product is universal. On the other hand, adaptation is trying to modify its strategy based on the cultural preferences of a country. For example, Mcdonald fast food chains differ in food and beverage menu based on the country. Besides from television, radio, newspapers and magazines, global advertising also uses to promote brands through sponsorship in events such competitions in sports because it is watched by all people around the World or trade fairs if the target segment is B2B. (Kotler, Armstrong, Saunders & Wong, 1999)
1.4.2 Sales Promotion
Sales promotions are short-term incentives or benefits for buyers if a customer purchases products on which the promotion is applied. For example, these benefits appear in the form of coupons, free services, vouchers, free samples, and discounts to encourage customers to buy the product immediately because of the limitation in time. This tactic is used to increasing current sales and decreasing stock of unwanted or outdated products as well as creating the longer relationship with customers. However, due to a large number of sales promotion of every brand, this strategy is less effective because customers do not remark the enthusiasm of that benefit. Therefore, marketers must be more creative in order to provide unique campaigns that attract more attention. Furthermore, sales promotions have mostly only a positive impact on the group of individuals that is not loyal to just one brand and is open to trying new brands. The main reason is that this segment is searching for a less expensive product and favourable offer. Sales promotions are divided into three categories: The first is consumer promotion which is used to targets consumers. As it was mentioned above, this promotion is for increasing short-term sales, developing the customer’s loyalty and
14 attract customers to try new products. To achieve these goals, an organization usually offers to consumers coupons, reduction in price, samples and competitions. Secondly, trade promotions try to convince retailers and wholesalers to buy new products to display them and increase the supply. To attain these goals, an organization can apply a discount to their products or reduction in the sum of order, offer an option of returning goods in the case of unsuccessful sales and offering free goods for certain quantity. Lastly, business promotion enhances to find new business partners, increases sales, remunerates sellers for their work and gives benefits to its buyers. The business promotion tools are similar to the trade and consumer promotion, but also pay attention to attending conference and fairs to introduce the brand, its new products, creating new partners or purchasers. Furthermore, it establishes competitions for salespeople to feel motivated and recognized as a competent person. (Kotler, Armstrong, Saunders & Wong, 1999)
1.4.3 Public Relation
According to Harlow (1976, p. 36), "Public Relations is distinctive management function which helps establish and maintain mutual lines of communication, understanding, acceptance and cooperation between an organization and its publics; involves the management of problems or issues; helps management to keep informed on and responsive to public opinion; defines and emphasizes the responsibility of management to serve the public interest; helps management keep abreast of and effectively utilize change, serving as an early warning system to help anticipate trends; and uses research and sound and ethical communication as its principal tools." Companies promote their brands through public relation to build an image because PR focuses on the publicity and creates relationship and partnership with other organizations. This method is used for the presentation of the brand through stories which are shared in events and mass media. Also, in the case of rumours, this strategy could be useful for coverage and regaining the reputation of the company. Within an organization, public relation usually has own division and it is not part of the marketing team. This communication strategy is less costly than advertising, however, it can appear only for a short period. Public relation can be performed by various tools such as press agency where the information about the brand/product could be delivered to the public, lobbying, doing charities and cooperating with non-profit organizations. Moreover, PR strategists plan events where they can inform news about the brand or celebrate success to impress the public. On the events are invited celebrities/influencers who promote the organization because of its collaboration. Logo and products with merchandising are also one of the tools based on which the public can
15 immediately connect with the brand. Furthermore, interviews and speeches are used to introduce the topic and for a deeper understanding of the brand. Lastly, companies use sponsorships because it creates awareness and public recognition. In overall, public relation is considered as the most credible communication tool in comparison to other promotions. (Kotler, Armstrong, Saunders & Wong, 1999)
1.4.4 Personal Selling
Selling is considered as direct communication of an organization with a customer through a salesperson. Salespeople could be a shop assistant in a store who recommends products to a customer or a consultant in a consulting service, an insurance company or dermatology clinics which involves a more creative way of selling and lastly, the missionary selling which is in form of selling products through educating its customers. Selling tactics depend on the type of product or services of each company. Each company has its style of personal selling and not always a vendor is needed for persuading buyers. Other options can be used for selling such as using a mediator as a broker who can sell for commissions or sending catalogues via email to buyers. In order to be to build selling skills for salesforce, an organization should invest to the time and effort for its employees by providing training to be well-educated about products and how to retain a good relationship with customers. However, selling tactics can be taught in two different ways such as some of the companies emphasis on the customer needs, try to understand and listen to the customers wants to recommend the product that a buyer demands. On the other hand, other companies believe in the aggressive way of selling and try to convince customers under high pressure to buy their products. According to findings by Ramsey and Sohi in 1997, customers’ priority about a salesperson is to be empathic, listens to their requirements and helps them to choose the relevant product based on their needs rather than pushing them to buy products that will not be used. To deliver higher results in sales, salespeople have to experience several steps of the selling process and develop its effective methods. Firstly, prospecting and qualifying mean that a salesperson has to determine the group of people who have a high probability of purchasing products and find an opportunity to reach them. Ways to achieve potential buyers are several, for instance, obtain contacts from the current customer or cooperating with other businesses which operate in the different industry. Secondly, preapproch is observing and learning about potential customers as well as its needs and information about the product before selling and offering any products. Concerning this step, a salesperson also has to consider about the way how to approach customers such as in person, over the phone or written message. Thirdly, the
16 approach begins with establishing a relationship with a potential buyer. The next step is presentation and demonstration, the salesperson gives the instruction and information about the product and suggests alternatives for great deals. Moreover, questions from customers are part of the process, therefore a salesperson has to handle objections which is the fifth step. This involves responding questions and clarifying arguments to convince the potential buyer in purchasing. Closing is the second to the last which is about asking whether or not a customer will be interested in buying a product to close the sale. A salesperson could suggest a price deduction or a gift for the successful purchase. The last process of selling is called follow-up which ensures the buyer to return due to the good experience. (Kotler, Armstrong, Saunders & Wong, 1999)
1.4.5 Direct Marketing
"Direct marketing is a relational marketing process of prospecting, conversion, and maintenance that involves information feedback and control at the individual level by using direct response advertising with tracking codes." (Bauer and Miglautsch, 1992: 10) Due to the massive amount of advertising around us, which lead to the inattention of the audience, this method is applied to obtain an immediate customer’s response to purchasing or not. The sales tactic focuses on direct communication with an individual customer. In the past, marketers collected the individual’s information through catalogue companies and telephone directories and subsequently connected customers by phone or post. Nowadays, with developed technological advances, the computer system can generate all the contacts database based on a group of interest. For receiving a higher amount of responses, strategists personalize and custom their emails by inserting name and giving sales promotions on birthdays or holidays. This way of communication is more personal which creates a real affection towards the customer and builds a stronger relationship. According to Kotler, Armstrong, Saunders and Wong (1999), there are several types of direct marketing: Face-to-face selling: This form of direct marketing is also refers to door-to-door selling because sellers go to offer their product where the potential customer is. It means that a salesperson arranges a meeting through telephone calls and then meet them at an agreed place where the process of selling begins. This type of selling usually occurs in multilevel marketing/pyramid selling business model. The advantage is a more personal attitude and the client does not have to go anywhere. On the other hand, it can appear as the pyramid scheme.
17 Direct-mail marketing: This type of marketing uses the paper and digital form of mail such as sending letters through post office where products are offered as well as discounts and new information. The messages could also be delivered through emails and voicemails. For example, charities and non-profit organization use this method to raise funds. Catalogue Marketing: Catalogue marketing is mostly applied to the business-to- business segment and it provides a list of products from which retailers can select the order. Also, it can be used in big stores for customers to find a particular product because catalogues could picture all the products including unavailable ones. Telemarketing: Telemarketing involves calling customers to sell and offer products. Organizations often hire an external call centrum companies to call their targeted customers. However, these days, telemarketing is less efficient because it could annoy customers due to the high amount of advertising calls. Direct-Response Television Marketing: To achieve a direct response from television marketing, marketers insert into an advertising a telephone number to customer to reaching. This promotion can have to perspective, the first is to inform the public about the product’s functions and the second is an immediate purchase. There are also television channels which are only for television marketing. Due to the invention of the computer and internet, television has fewer viewers, therefore this method is less useful in comparison to the past. Digital Marketing: Digital marketing is one of the newest types of direct communication and its application started in the 1990s when the first searching engine was established. (Smyth, 20017) With the increase in Internet usage, computer and smartphones development, digital marketing became one of the most crucial promotion tools for the marketing industry. Placement of advertisements through digital marketing is in the form of searching engines, social media, website, mobile marketing and viral marketing which is referred to word-of- mouth. The objectives of digital marketing are to attract the public to visit an online platform, audience retention, to persuade them to be involved and actively participate in online activities such as purchasing and writing reviews, and lastly to evaluate the effectiveness of the advertisement to improve it. (Jones, Malczyk, Beneke, et al., 2011)
1.5 Segmentation, Targeting and Positioning Marketing (STP)
Segmentation, targeting and positioning are strategies that following each other and in the consequence, it results in a developing of a marketing strategy. Also, the STP is used for creating a communication strategy because it determines the targeted group and its preferences.
18 This process is the core for decision making of choosing the right marketing mix for the group of interest.
1.5.1 Segmentation
A product cannot be distributed to everyone because each person has different needs and wants, therefore segmentation of the market is used for dividing the audience into subgroups with similar preferences. The segmentation analyses the characteristics of each segment and try to understand the needs and wants of each group. This method enables a company to subsequently focus only on the targeted audience more effectively rather than wasting time over satisfying all who are not interested in buying a product. For marketers, it is more efficient to determine the segment of interest to target only the ones who wants and needs a company’s products which results in a more precise marketing campaign that is in correlation with customer’s demands. Segmentation is effective when potential customers are in the group of people which shares as many patterns as possible because it represents the similarity of a group. The segmentation is divided into the following groups: Demographic segmentation Demographic segmentation is the primary process for dividing customers according to their age, gender, income, occupation, religion, nationality and race. The preferences in age make a considerable difference because each generation has its interests and taste. Also, each gender uses and prefers different products; for example, males are more fond of cars and females take greater pleasure in purchasing skincare products. Moreover, products are created based on an individual's stage of life because in each stage a person's needs and satisfaction are distinct. Therefore, the products are varied and created based on the age group, for example, infants cannot consume cow milk, consequently this product cannot be targeted on this segment. Lastly, a group which shares the same religion, nationality or race usually has the same choices due to the similar culture and habits. Geographic segmentation In the expansion of businesses, geographical information is essential for marketing strategy. This category examines the location and languages in a new market and products are adapted to the location because of the consumer’s demands. Furthermore, types of promotion are also modified according to cultural characteristics and translated to a local language due to language barriers because not all countries have English as the official language. Also,
19 geographic segmentation focuses on the specific location of the market such as town, city, suburb area because each area requires a different kind of products and its price. Behavioral segmentation Behavioral segmentation concerns about consumer behavior such as the reaction of an individual to a product and how the one learns about it. This concept focuses especially on where, when and in which occasions should a product be distributed because of the at that time the demand of a product is greater than normal. For instance, when a company manufactures papers and knows that during Christmas, people need wrapping papers, then a company should plan their production ahead and started to sell it at least a month before the day of Christmas Eve. Therefore, companies should search for behavior variables that heavily attract consumers to buy it because everybody needs it, especially during a holiday season. Psychographic segmentation Psychographic segmentation distinguishes the audience based on an individual’s activities, interests and opinions. Products are classified based on a social class which is deferred due to the lifestyle of each class because the ones who are in the upper class prefer premium products while poorer class is pleased with average products. Therefore, companies should determine to whom to sell their products, at low/high quality and at what prices because each social class has a different amount of disposable income. All of these variables are essential because these directly affect whether or not a person decides to buy a product. (Gilligan & Wilson, 2009)
1.5.2 Targeting
This section discusses how to determine and select segments as well as targeting strategies. Targeting is the following step after analyzing segments of interest. In targeting, a company has to choose the segment of concern and its quantity according to achieving most of the customers within a group. Before starting to select a target segment, several aspects should be evaluated to determine the adequate target group. Firstly, a company has to define the size of a selected segment to be in the same proportion as a company due to the competition. For instance, a company is on a smaller scale and targets the same segment as a big corporation then the company will not be able to take over the group of interest because a corporation's promotions are much stronger. Furthermore, the potential growth of a targeted group is one of the parameters that should be observed due to its attractiveness to new competitors. The second factor is the structural attractiveness of the segment, and it focuses on profitability. The risk of
20 a large and growing segment is that it can decrease the profitability due to the possibility of many other companies to enter the market where could sell the same or substitute product. In regards to profitability, Michael Porter’s five-force model is one of the most common tools in measuring structural attractiveness. There are five forces which influence the profitability: competitors, new opponents entering the market, a new product that can substitute the current one, power of suppliers and buyers. Thirdly, if a potential chosen segment corresponds to long term goals of a company and whether the existing resources of an organization coincide with requirements to operates to successfully fulfilling a targeted group's necessities. Another two questions need to be asked for selecting the right segment. The first question is whether the segment is increasing or decreasing based on that companies can assume the volume of sale and its profitability. The second question poses whether the segment is dynamic because many variables can influence the change of the segment. The consequence of changing is the merge of several segments to a greater extent or dispersion into subgroups. Also, over time the segment could demand different products, after that, the product will not be able to sell. These are questions should bear in mind in order to expect the changes in each selected group. Strategists use five specialization strategies for targeting suitable segments. The first is the single segment concentration which means a company focuses on only one segment. It is used mostly in a smaller organization because the approach is more effective due to aiming just on one specific segment. Secondly, selective specialization intends more than one segment, products are intentionally varied in different segments. For example, the purpose of a company releases two similar products with significant distinct prices to acquire two different social class such as lower and higher class. Thirdly, product specialization is when an organization creates all range of products that would attract all types of customers, for instance, clothing companies sell only garments at the same price, however, their products could be worn by all age categories. Furthermore, on market specialization, a business entity addresses their product to only a segment of interest and trying to comply with customers' needs and wants such as fitness products are mainly for people who exercise. Lastly, the satisfaction of all population with all kinds of products is called full market coverage. This pattern is usually very costly because products are too diverse as well as target groups, therefore a company has to create various business strategies which resulted in higher expense. (Gilligan & Wilson, 2009)
21 1.5.3 Positioning
The last process of STP marketing is positioning which specifies the position of the product on the market. Before implementing the positioning, an organization has to define its competitive advantage and choose the segment to target. To inform customers about the position of the product, marketers have to communicate the product’s functions, its uniqueness and how does it differ from existing and potential products from competitors. For example, a fashion company Hermes targets the high-class segment and belongs to one of the most prestigious fashion brands. The brand's exclusivity is handicraft products from equestrian leather which available in a limited quantity. Furthermore, several factors represent an image and reputation of an organization such as composition, function, quality and effectiveness of a product, how a brand communicates with customers through promotion and lastly the specification of customers‘ segment and its evaluation and reviews. Positioning’s intention is, in other words, a process of creating a public perception of a brand and its value as well as attempts to deliver to customers a message about the position of a brand in comparison to competitors. The marketing strategy is designed according to the positioning of the brand, therefore its determination should be cautiously selected in the case of product failure in the market due to the unsuccessful strategy. There are three reasons why positioning is ineffective. Firstly, it occurs when positioning is confusing and customers could not recognize to which category group the brand belongs. Another case is over-positioning which means that an organization overpriced its product in comparison to the quality, consequently, it resulted in a negative reputation because of unfulfilling customer‘s expectations. Lastly, under-positioning happens when an audience has a lack of knowledge about a brand due to unclear communication of its value and competitive advantage. To develop a strong positioning, strategists use a perceptual map which guides a brand to the right standing position. The map shows the customer's judgment of the product as a result of product characterization with two variables, which depends on product characteristics and individual perception, for example, figure 1 illustrates the perceptual map of quality versus price, as it is a benchmark for the customer to decide whether to buy a product. (Gilligan & Wilson, 2009)
22 Figure 1: Example of a Perceptual Map
Source: https://www.thebalancesmb.com Finally, besides identifying the position, over the time an organization needs to repositioning its strategy for maintaining the position on the market due to competitiveness. There are four strategies for repositioning: The first one is gradual repositioning which is regularly planned and adjusted based on the market movement. Secondly, radical repositioning is when customers are not interested in the product, therefore it requires the development of a new product that is compatible with the market. Another strategy is innovative repositioning which is the creation of a completely new strategy that has not been used before. Lastly, zero positioning means that a strategy remains unchanged and vague due to inability to communicate with customers. (Gilligan & Wilson, 2009)
23 2 Analysis of Marketing Communication Strategy
This section analyses the current communication strategy of Amorepacific in Asia, the segment of interest, positioning of the brand as well as recommends communication strategy for the company to promote their brand in the Czech Republic and estimates budget for promotion tools. Due to many sub-brands of the organization with different products and target segment, the analysis and plan of a strategy are developed and adjusted to only one particular brand Laneige. This brand was chosen because it has been already expanded to the American, Australian market and recently to Europe through retailer cosmetic store Sephora. Laneige targets buyers from the age of 20 to 35 which are the same as the survey’s sample population supporting this thesis. According to Amorepacific’s quarterly earning report 2018 (Q4), the brand Laneige is in the process of developing its customer communication strategies to secure and grow its position in the cosmetic market.
2.1 Current Communication Strategy of the Cosmetic Industry in South Korea
Majority of the cosmetics companies have stores where products are exhibited to customers to test and buy, thus personal selling is one of the essential communication tools. These cosmetic products are usually harder to decide to buy for those who do not have much knowledge about the feature of ingredients and how to use it, therefore there is always a need for a consultation for the explanation of the functions of the product and its usage. In Asia, the personal shop assistants are well educated about products which they offer and how to help customers with the right selection of products based on their skin type. Furthermore, the dominant type of promotion for the cosmetic industry is sales promotions due to the massive competitors and stores on every corner of the street. Sales promotions are mostly in the form of giving samples, discounts and "buy one, get one free" or "two for the price of one". An example of this could be seen during the summer when they offer free gifts such as a bottle of water or a paper fan with their logo on it. These are typical sales promotion tools in the Asian market. For example, in 2018, Laneige created a promotion event named Water Bar to collect a fund to donate to a filtration system in Malaysia to six rural villages in order to help them to obtain clean water. (“Waterful Sharing Campaign,” 2019) They hold this event at shopping malls and encourage customers to buy their product because it has been said that from each purchased item apart of it will be a contribution to the charity and in exchange customers receive
24 a water bottle. Figure 2 illustrates the visual image of this event. Furthermore, they include a program for the customers such as the opportunity to try new products, providing a vending machine with their products, games, juice bar and give the advice to keep the skin hydrated. Due to these kind of events, the company can grow its sales, create notable awareness and an overall positive brand image.
Figure 2: Visualisation of Water Bar event
Source: http://www.pamper.my/news/beauty/skin-care/moisturizing-power-super-vegetables-laneige-water-bar- roadshow-14-may-2018/
Lastly, Korean brands always choose for their advertisements an ambassador who is currently popular and is perfect due to the high cultural value of beauty which considers celebrities as a beauty role model. Therefore, in all advertisements on TV, billboards and posters, there can only be seen public figures because they have a huge influence on the audience, especially in the beauty industry. Also, the Korean TV drama series and entertaining shows have a large number of viewers, therefore many companies are sponsoring these programs to promote their brands. (Roll, 2015) For instance, in a Korean drama series called Descendants of the Sun, there was a scene where the lead actress was using a Laneige product to promote this brand.
25 2.2 Survey Results
The purpose of the questionnaire was to identify the buying factors for cosmetics and personal care and how consumers come upon the products. In the survey, there was a set of questions related to the interest of skincare routine, spending, which factors influence the buying decision and what products and brands they use. The answers were collected by sending a survey link to friends, colleagues, classmates and Facebook users because it was shared on several Facebook groups. The selection of participants was random because the sample population for this product was not restraint, however, it preferably focuses on females due to higher preference and demand for the beauty products. The total number of collected answers was 82. All participants live in the Czech Republic but are from a different country of origin and are students. The gender from the total number of respondents is 81.7% female which is 67 in total and the rest 18.3% are male. From figure 3, it can be seen that the age vary from 15 to 34 which corresponds to the target audience of the brand Laneige but most significant number of participants are aged from 20 to 25.
Figure 3: Answers to survey question: What is your age?
26 The answers received from females can confirm that skincare is essential for them because from all women 98.5% are interested and only 1.5% are not. Moreover, 95.5% have a skincare routine while 4.5% do not, the common reason for not taking care of their skin is the person has no issue with it therefore no action is needed. Figure 4 below shows that 61.2% of women are spending below 500 Kč, on the other hand, the same result of percentage in the chart number 5 indicates that they are willing to spend more money if a product can guarantee results. Despite this, 19.4% of them spend from 500 to 1000 Kč, 13.4% from 1000 to 2000 Kč and only 6% spend above 2000 Kč. The ones who spend more tend to purchase from brands such as Kiehl’s, Lancome, Estee Lauder, Sensai, Muji, The Ordinary and Klairs which are brands that target middle and high social classes, therefore the price is higher. The price factor does not depend on the age but the preferences and willingness to spend on their favourites brands.
Figure 4: Answers to survey question: How much do you spend on skincare products monthly on average?
27 Figure 5: Answers to survey question: How much are you willing to spend?
This survey was not explicitly aimed for males but regardless was distributed to men to determine their interest in taking care of themselves. The result in figure 6 shows that 80% of men are interested in skincare which is relatively high in comparison to the opposite assumption. Also, figure 7 illustrates that 60% of men have or sometimes have a skincare routine. The result collection for male only complies with the ones who have a small interest in cosmetics. Men purchase skincare items only if someone recommends it to them or based on positive reviews and also use only two products such as moisturizer and cleanser. Furthermore, the ones who are interested in skincare use cosmetic products from brands such as Dove, Nivea, Garnier, Loccitane, Vichi, and Oriflame which are brands that sell their products at a lower price. According to answers, all male consumers invest minimum money into cosmetic products and are not willing to spend more than 500 Kč. Therefore, it can be claimed that men care about their appearance and are trying to do something about their look to be better, but they would only buy products at a lower price. However, even the questionnaire was sent to male individuals, the number of male participants is very small, thus it can be seen that the male population did not want to respond to the survey due to the lack of concern.
28 Figure 6: Answers to survey question: Are you interested in skin care?
Figure 7: Answers to survey question: Do you have a skincare routine?
29 One part of the survey includes the questions on factors that are influencing buyers to purchase cosmetic products which are the most important findings for this thesis. First of all, the answer to the question about how consumers choose their products is shown in figure 8 where participants could choose more than one answer. The peak of the chart is “recommendation from someone” which means that consumers rely the most on the suggestions from people that they know because they had already used it, therefore they can confirm the function of the products. In the second place was the answer "review", thus the reputation and sales of beauty brands highly depend on its quality and effectiveness because customers mostly decide to buy based on physical evidence. Another significant indicator is dermatologists’ advice because they are specialists who studied and have experiences with treatments of the skin, therefore it could be considered as a credible source. Furthermore, influencers such as youtubers or bloggers have a strong impact on the buying decision because they can relate to the situation of their viewers. A remarkable finding is that 20% of the sample population purchase cosmetics due to its popularity. Whereas, advertising on television or the internet, social media and in magazines are seen as the weakest communication tool, however, it creates the awareness of the brand because it resulted in the perception of popularity due to frequent appearance. Personal selling and sales promotion such as giving samples in a store or events have an impact on the customers because the results of these two communication strategies are approximately 20%. Question 11 obtains answers such as 52.4% prefer only buying in stores, only 2.4% online and 45.1% both, therefore the personal service in stores has to be according to expectations to the customer because customers preferably buy cosmetic products physically. Lastly, the organization should design a nice looking packaging for their products to attract customers because from the questionnaire it was identified that 53.7% of participants had bought a product based on its covering.
30 Figure 8: Answers to survey question: Based on what do you choose to buy cosmetic products?
The last part of the survey was to find what products respondents use and if they are familiar with Korean cosmetics. The overall percentage of people who have heard about Korean cosmetics is 65.9% from which 41.5% already used its products. The ones who had experience with Korean product would recommend it because 88.2% from total answered that they would continue to use it, therefore the products from South Korea have a positive reputation and could be considered as effective. Figure 9 illustrates types of Korean cosmetic products consumers used, the most significant item is sheet mask, it is more well known and preferred than clay masks, therefore 70.6% of participants already used it while clay mask only 11.8%. The ones who already tried Korean cosmetics and did research about it, then know how toner is essential for the skincare routine, thus this product placed the second with a score of 41.2%. Around 30% of people who already had an experience with Korean products use also cleanser and moisturizer. The least applicable products are serum, sunscreen and eye cream because it was used by 20% from the population sample.
31 Figure 9: Answers to survey question: What kind of product did you use?
Participants who reply to question 14 as they have not tried Korean cosmetic products have questions related to the openness towards it and which products they would like to test it. The results show that 61.3% are not sure if they would try it, hence their answers were “maybe”. Moreover, 25% would like to try it while 13.6% would not. The outcome of this question is that respondents are uncertain due to little or no experience with Korean products. The most concerning products for those respondents are the ones which specifically treat skin with an issue such as acne prone skin or anti-ageing products and sheet masks. Despite the importance of sunscreen, the number of interest in this product was the lowest. Lastly, all participants are open to test a new cosmetic product except for 8.5% respondents who do not care about their skin and do not use any products. Hence, it can be concluded that the young generation due to globalization is more approachable and open- minded to unfamiliar products which resulted in more accessible communication.
32 2.3 Laneige Segmentation, Targeting and Positioning
Segmentation Figure 10 shows the chart of cosmetic market segments which are divided into gender, age category, geography, product specialization and psychographic factors.
Figure 10: Segments of the Cosmetic Market
Target audience The main target audience for Laneige is women because the survey results confirm that men are not interested in taking care of their skin. Although some men care about their appearance and a small percentage of them use skin care products, they would prefer less expensive brands rather than Laneige which its price is defined for wealthier people. The products' function is universal and can be used by all age categories. However, the products of this brand are mostly skincare and focus on hydration and pore control which are aimed for younger generations and middle age groups. Therefore, the brand's age target segment is from 20 to 40 because over the age of 40 people start searching for anti-ageing products. Laneige is identified as a premium cosmetic brand, thus the products are affordable for people who have middle to high income because the price is reflected in the classification of the brand.
33 The location for promoting the brand is the Czech Republic, and the target area should only be in big cities such as Brno, Ostrava and the capital city of Prague because in these regions there are the most potential customers due to their higher earnings. Due to the brand country of origin, South Korea, the psychological factor of the target segments is the deep affection for Korean cultures such as fans of Korean singers and actors who follow their trends or watch TV soap operas. Another group is Asian people because products are developed in Asia, therefore it matches better with their skin due to the similarity of skin structure. Lastly, the product is made for a group of people who are addicted to skin care and for the ones who prioritise their appearance because they are self-conscious.
Positioning The competitive advantage of Amorepacific is creativity and innovation because they were the first ones who invented cushion foundation and Laneige was the first brand of Amorepacific which delivered this product to the market. People all over the world have been using this form of foundation and the product became one of the most essential items for every woman. Due to the high demand, many competitors started to produce the same products. Figure 11 illustrates the perceptual map of Laneige which consists of two factors: the vertical line is the classification of the brand if it belongs to premium or mass and the horizontal line represents products' effectiveness. From the perception of customers, cosmetic brands and their products are differentiated mostly according to these values. As can be seen from the map, Laneige is a premium brand and the products' effectiveness on the skin was evaluated based on reviews. Competitors were chosen based on the survey participants' preferences and a brand's country of origin. The perceptual map depicts Laneige in the higher position of classification than Bioderma and Havlíkova Apotéka, but the products are not as effective, moreover, the price is more expensive. On the other hand, Laneige is more significant than brands from premium class, therefore, if the brand’s target group are from high social class, then the brand will be more preferred.
34 Figure 11: Perceptual Map of Laneige
The following positioning statement for the brand Laneige was concluded from the STP analysis: For young and sophisticated women who find the beauty in the healthy radiant looking skin, Laneige is the premium, natural, innovative and functional skincare with stylish packaging which enhances the quality of the skin and brightens the lifestyle.
Creating the marketing Persona To form a customized marketing communication strategy for the brand, a marketing persona is identified to have a clearer and more specific understanding of the targeted customer segment. The customer representative for Laneige is named Alexia who is currently 28 years old and lives alone in the capital city of the Czech Republic, Prague. She works as a brand manager and her income is approximately 40000 Kč per month. Her job description involves communication with the customers and partners, therefore she has to always look neat. She is sociable, desires to network with people and enjoys outdoor activities such as sport, fashion and beauty events. Alexia owns a laptop computer and smartphone, which she uses at work and outside. She is technically proficient and knows how to use internet and search engines. Alexia is an active user of social media such as Facebook, Instagram and often watches videos on Youtube. She follows fashion and beauty bloggers and influencers on her social media to get inspirations because she loves shopping and taking care of herself. The factors that influence Alexia's buying decision is the quality which she compares it with the price.
35 2.4 Communication Objectives of the Marketing Plan in Czech Republic
a. The main target audience b. The desired response (which reactions are expected from customers) c. How to measure the response d. The period which the marketing plan should be finished e. Creation of brand awareness f. Recognition by Czech audience g. Obtain good reputation in EU
2.5 Defining message and Choice of Media
The message for the audience: Skincare is not only about products but also about lifestyle which creates an everyday ritual for perfect skin. Due to the complicated process of Korean skincare routine which requires many steps to achieve clear skin, the message of the brand emphasis on the creation of skin care lifestyle instead of focusing solely on products. Distribution channels: The main communication channels are physical stores and online networks such as social media and google ads because those are the most frequently visited platforms. Social media and search portals were selected because according to the Czech Statistical Office the target group of the brand, which is from age 20 to 40, access the Internet the most in comparison to other age categories. The number of the internet user is increasing by each year and in 2017, on average 97.43% of people in the age category 16 to 44 use the Internet. (Czech Statistical Office, 2018) Also, on average 73.26% of individuals at that age purchase goods over the internet, from which the most significant age is from 25 to 34. (Czech Statistical Office, 2018)
2.6 SWOT Analysis
Figure 12 identifies SWOT analysis for Laneige entering the European Market. Strengths and weaknesses are examined according to the internal factors of the company and opportunities and threats are external factors that can influence the business plan. (Gürel, 2017)
36 Figure 12: SWOT Analysis
Strengths The most significant strength of Laneige, as well as a competitive advantage, is the innovation, as it was mentioned before, they established products which became well known. The reason for their successful products creation is the high investment to research and development, for instance, in 2017 spending of R&D was 91,848 mil KRW (approximately 79 mil dollars). (MarketLine, 2019) Concerning that, products have a high quality because they grow the plants in their research laboratory, try to find and extract natural essences for their products. Amorepacific is one of the leaders of the cosmetic industry in Asia as well as that it has built a strong brand image, therefore the brand is widely known and its reputation within the Asian community is very positive.
Weaknesses Laneige has recently penetrated to the European market and has not promoted its brand in Europe, therefore its awareness is low which can affect the success. The company struggle with the creation of communication strategies due to the lack of knowledge about cultural values and differences in cultural preferences. Moreover, the scepticism can threaten the brand image and sales because the reputation of the Asian brands is mostly negative due to the stereotype perception of Czech people on the product quality connected with the Chinese products.
37
Opportunities The market value for skincare in Europe is $27,864.4 million and in comparison to the year 2017, the value increased by 2.9% in 2018. (MarketLine, 2019) Therefore, the skincare market is growing which is beneficial for entering this region. Also, it can be expected spending increase of Czech individual because disposable income in the Czech Republic rose by 1.9% in 2017. (OECD, 2019) Lastly, the demand for skin care will increase due to the environmental pollution and UV layer is weakening which results in skin damage. Threats The cosmetic and skincare industry is highly competitive and brand loyalty is relatively strong due to the fear of trying new products. Laneige main competitors in the Czech Republic are Esteé Lauden, Lancome, Kiehl’s, Neutrogena, Bioderma and Havlíkova Apotéka. Another threat is the possibility of the leak of counterfeit products to Europe. In 2017, a huge amount of imitation of Korean products was found in Chinese speaking countries which worth US$85,742. (Choi, 2018) Finally, the European Union can regulate import legislation which cannot allow the Korean products to be imported to Europe.
2.7 Tools and Channel Selection for Marketing Communication Strategy in Czech Republic
Advertising Advertising for Laneige should be placed on Youtube channel and social media such as Facebook, Instagram because their potential customers use mostly this kind of distribution channels. Nevertheless, ads on television are not effective as in the past due to its replacement by the Internet and computers which led to a decrease in the audience who watch TV and besides it is the most expensive way of promotion. There are other ways where the advertising could be displayed such as in news and radio, but these either would not be sufficient considering the target segment and the brand positioning. In the Czech Republic, statistics currently show that 4 657 000 people use Facebook which is equivalent to 43.8% of the population and from all users 52.4% are women. The highest number of Facebook users are from the age of 25 to 34 which is around 1 320 000 people. (“Social Media Users in Czechia: March 2019,” 2019) Facebook has the highest amount of users in comparison to other social media, therefore the ads should be certainly inserted to this media. The further social network is Instagram which is used by 19.4% of the population which corresponds to 2 067 000 users and the dominant segment of users are also women. Instagram is more prevalent among younger
38 individuals than Facebook. (“Social Media Users in Czechia: March 2019,” 2019) Moreover, the survey certifies that individuals who live in the Czech Republic are attracted to social media and not by television, radio or magazines. The advertisement should include a local public figure such as a fashion influencer on Youtube or beauty bloggers on Instagram to attract a new audience. Also, Laneige is a premium brand, therefore the brand should engage a famous person in their ads to clarify its position and quality of products. Laneige's advertisement content should portray every step of everyday Korean skincare routine to deliver the message that skincare is not only about products, but it is a form of lifestyle to achieve the best results for the skin. Moreover, to show more products in one video, the advertisement should include several individuals and display their day and how they use each product. For more affection to the audience, Laneige should choose one cast from an Asian background to depict the Korean culture and a European influencer who could deliver that the skincare ritual is everywhere the same to attain the best outcome. Physical placement of advertisements should be in stores where their videos should be placed to obtain the attention of visitors and if the store does not have the equipment to play video, posters can replace it. Furthermore, billboards are one of the many ways for creating brand awareness and it should be located in a place where people often go shopping such as malls or on highways to attract car driver’s attention. Also, it should be visible in locations such as public transportation stops because while passengers are waiting for the bus or tram, they could quickly notice it. Lastly, the period when the advertisement is most noticeable is during holidays when people have to buy presents, for example, Christmas and Valentine’s day. Companies which sell face care products should place ads during the change of each season, especially during the summer when people need to care about their skin because the skin is susceptible to damage from the Sun as well as during winter when the skin becomes drier.
Personal Selling Personal selling is a form of in-store communication which is between a salesperson and customers. Because it involves the direct interaction, employees should be getting regular training to be educated about current and new products and the skincare process in order to deliver the best consultation for customers and answer all the questions related to the product's functions and ingredients that benefit the skin. The importance of a salesperson's knowledge is that they can satisfy buyers and persuade them to purchase more products than they ask for because they usually do not use as many products as is needed. Also, there has to be training
39 about the selling process as was mentioned in the theoretical part of this thesis because if the person does not follow the methods and does not develop the selling skill, they will not be able to sell as many products to achieve higher sales. Moreover, not everyone could be a salesperson, therefore it is crucial to choose an adequate candidate who could fit the position and are willing to help customers. For example, for an introvert person, it is more demanding to communicate with the customer and deliver everything that a customer needs because these people are usually shy and it takes them a long time to open up to someone. This can be an issue in the closing step of the selling process because this is the most challenging part. Moreover, in the case that an employee is not motivated to do their job, the company should offer incentives and benefits for salesforce if they reach a certain amount of sales. The store appearance communicates positioning of the brand and its message. The Laneige's symbol that represents the brand is water because the base of their all products is developed and made from water. Their brand's name comes from the French word snow, therefore the design of their stores or stalls should depict in the splash or drops of water in a combination of light colours such as white and light blue which emphasises the water element as the fundamental component of perfect skin perception. The design and ambience of stores should be memorable with a unique decoration where customers can take pictures due to its aesthetic appeal. These pictures can be shared on customers' social media which can increase brand awareness. Also, the atmosphere of the store should also be taken into account because it can influence purchasing behaviour. According to a study, customers' pleasure is reflected in the ambience of stores which has an impact on the amount of money they will spend and the time spent in the store. (Donovan et al., 1994) Moreover, another research shows that it does not only depend on the atmosphere but also on the emotional feeling of customers. (Sherman, Mathur, Smith, 1997)
Direct Marketing Laneige should use direct marketing only through email, short text messages, fliers and door-to-door letters because others tools such as telemarketing, direct-response television marketing, door-to-door selling or catalogue marketing are not suitable for this type of industry and are not in correlation with the company's business model. For customers to feel more special, emails and letters should be customised and written based on personal information which creates a stronger bond between customers and the brand. This information can be achieved through registration for obtaining a customer card or discounts. Through emails, Laneige can invite customers to product launches and special events where they can buy new
40 products and receive samples. Text messages should be sent when a physical store or online store has discounts in a particular time, most commonly during holidays, customer's birthdays or anniversary celebration of the company. Lastly, they can use the door-to-door letters in which it can be sent coupons or samples of new products that are not yet available.
Sales Promotion Sales promotion should be distributed online through social media such as Instagram and Facebook. The first one is online which involves email marketing and sending information about discounts and coupons. On Instagram, promotion can be in the form of giving discounts for each who mentioned the brand on their Instagram posts. Also, customers who follow the brand on Facebook can compete for winning free gifts; for example, three random winners who repost the brand's post on Facebook can get giveaways. On the other hand, sales promotions can also be available in physical stores by giving presents for the first buyers in a limited time or free samples for each purchase. Furthermore, the application of a special price for some products can attract new customers because usually, these kind of products can cost more which can discourage customers. Selling gift sets during holiday seasons can create an opportunity for people with a smaller income to afford to buy it because the price of each item in a set is less expensive, as well as that they can try more products at once. Mini products are also a version of the advantageous deal which can draw interest for a non-targeted group to try a new product, for example, for the convenience travelling to foreign countries during summer, people search for small personal products that can fit into their carry-on luggage. Nevertheless, the sales promotions should not be overloaded because the effect of it can turn into the devaluation of the brand's position on the market and decrease the value of products. Hence, the sales and discounts should not be all year round but only during occasional events or holidays in a limited time period.
Public Relations Asian cosmetic brands can meet difficulties during the entrance to the Czech community because of the cultural resistance. Czech people perceive products from Asia as inferior quality due to the stereotype connected with Chinese products. The distinction and unfamiliarity of cultural identity can lead to failure of the brand in the target market. For determining which factors have an impact on buying decisions of cosmetics, the survey was distributed to the local audience. The questionnaire found that Czech residences purchase cosmetics based on
41 composition, quality, and effectiveness. These values are mostly delivered through the recommendations, reviews, celebrity endorsement such as influencers or model and trends which means their choices depend on the credibility of someone and popularity. Also, the involvement of stakeholders such as employees, media and investors can have a significant impact on the promotion of the brand because the company can inform and consult the target segment through them to raise the awareness of the brand. Therefore, the most effective communication tools applicable to the Czech Republic is the usage of public relation such as word of mouth, press release and media. Press release and media are divided into three categories: paid, owned and earned media. Firstly, paid media means that the brand pays for the third party to promote them and uses products or brand placement in the advertising and news. (Lovett & Staelin, 2016) For example, Laneige can sponsor local influencers in exchange for inserting the advertisement on their youtube videos. Also, the brand can pay Instagram to play an advertisement video while the target individual is watching Insta stories. This method could be used as well on Facebook as an ad popping when the target user is watching a posted video. Another paid media can be a partnership with a famous brand that already has recognition from the public. Laneige can cooperate with a specific brand that has different specialization such as Swarovski to launch a new product. The brand's jewellery products are produced from crystal which can be metaphorically related to the skin results by Laneige products. This interaction can lead to higher brand awareness and reputation due to the partnership with a brand which has a positive brand image in the local community. Secondly, owned media are ideas created by the brand for promotion. (Lovett & Staelin, 2016) Laneige can organize an event to educate women about their skin, how to treat it properly, demonstrate the skincare steps, tips and its effect on the skins to make them appreciate their skin. Influencers can be invited to the event to experience the unusual program activities and show the process to their fans. Another part of the owned media is blog posts and video on the brand's website or channels. Video can show the products functions and how to use them in combination with other products and articles can describe handy tips about the skincare such as a homemade mixture of face masks or beneficial natural ingredients and its functions. Thirdly, earned media is the engagement of reviews, publicity and social media to gain trust. (Lovett & Staelin, 2016) One of the features of earned media is called the word of mouth marketing which is based on the reviews from the brand ambassadors, bloggers, and influencers. One most credible source is influencers whom the brand can give a box of the
42 products for free to show the followers the process of product usage, the experience, and recommendations. Each fashion/beauty blogger can offer to their fans the products' discount codes on their Youtube videos or Instagram posts and stories. Furthermore, in community relations, the brand can participate in sponsor local beauty contests, fair Interbeauty Prague or events such as marathons to target people who care about their health. Lastly, corporate social responsibility activities enhance the brand image, therefore to the positive public perceptions, the company can donate part of the profits from events, for example, to UN Women Czech Republic support women's rights. Moreover, the brand could offer to return packages of products with discounts or gift initiatives to actively promote the use of green bags or encourage recycling and protection of the environment.
Digital Marketing In today's advanced technological world, the usage of mobile phone and computer is part of a daily routine, therefore the communication tools through digital devices should also be included in this strategy. There are several sections where digital marketing must be applicated. Firstly, the mobile phone where advertisements will be placed in mobile applications which are related to health and is used mainly by females such as fitness, meal plan or women's menstruation tracking apps. Secondly, the company should create a website with educational content as was mentioned in the section owned media. The articles’ structure should be easy to interact, with clear headlines and subjects for efficient use of metatags and easier access to the articles through search engines. This method is called search engine optimization (SEO) which allows the company's website to be visible at the top of the searching engine because people usually click on the first several websites which are generated on the first page. Laneige should choose search engines such as Google and Seznam because these are the most frequent instruments used in the Czech Republic. For effective searching results, the keywords for Google Adwords and Seznam should be determined. The examples of keywords in the Czech Republic for skincare products: odličování, pleť, trend, tvář, péče, akné, kožní maz, hydratace, pleťová maska. Lastly, social media such as Facebook and Instagram have an option of paid ads which can reach the identified audience. The paid ads could be in the form of videos or photos posted on social media accounts which have to be updated continuously and frequently because the audience can easily unfollow due to inactivity. The content of posts should be informative to amplify engagements and the design should be authentic, aesthetic and in high quality to emphasise the message of the brand. The critical tool for measuring the effectivity of online advertising is called Pay Per Click (PPC) which means the costs of the
43 adverts on searching engines and social media are only calculated based on the number of clicks, therefore the company can receive feedback on the selection of keywords. (Kritzinger & Weideman, 2013) Digital marketing is recommended to use in the early phase of the marketing communication plan for brand awareness.
2.8 Budget and Calendar
Budget In 2017, Amorepacific used 56.64% of the total sales for the administration costs which means that they spent more than half of their budget in the advertising and promoting their brands. (MarketLine, 2019) Therefore, the budget for the expanding to Europe, we can assume 12% from the overseas revenue in 2018 which equals to 584.832 bn KRW (= $504.710 mil) and budget for Czech Republic we can estimate 1% (= $5.0471 mil) from the total budget to EU because it is a small country. (Amorepacific Corp., 2019) The cost structure of communication tools is assumed in figure 13. The most significant proportion of the budget is public relation because the investment is used for the venue of events, event programming, sponsorship, partnership with influencers and celebrities, charities which are very expensive. The advertisement is also costly, however, the budget will cover the production of ads, paying for running ads on Youtube and billboards, therefore, the portion from the budget is only 25% because the target segment mainly interacts with these channels. For digital marketing, it will be use 10% for running Google ads, mobile ads, building websites and creating contents. The rest 15% will pay for sales promotion, direct marketing and personal selling.
Figure 13: Cost Structure of Communication Tools
Others 15%
Digital Marketing 10% Public Relation 50%
Advertising 25%
44 Calendar Figure 14 shows the first half of the communication plan and the complete calendar can be found in Appendix 2. The light red filling represents when each promotion is used. The schedule is divided into six phases: research, development of advertisements, production of commercials, brand awareness, customer retention and brand loyalty. Market research will be in the first month through the distribution of surveys to the public to understand the culture preferences. In the second month, the plan and content of advertisements should be developed for its production in the following month. The stages of each communication objective are split by quarters. The first quarter is brand awareness where are implied advertisements to Youtube, billboards, social media, leaflets in shopping malls. Moreover, Laneige will be one of the sponsors on the Adidas women marathon and create its event with sales promotion to obtain attention. Personal selling, websites and social media posts should be regularly updated. In the second half of November, the brand should advertise on social media about the special offers for Christmas and it should continue until the end of December. The second half of the year focuses on customer retention and loyalty. To achieve these objectives, Laneige should implement direct marketing such as offering sales promotion through writing customize emails, sending door-to-door letters with samples, informing about the promotions through short messages on Christmas holidays, Easter, Valentine's day, International Women’s day, Mother's day and customers' birthdays. Lastly, the company should create events on its anniversary and every launch of new products.
Figure 14: Cost Structure of Communication Tools
45 2.9 Measuring and Control
The last process of the communication strategy is evaluation of its effectiveness. There are several key performance indicators which the organization should use for measuring. The first is about the brand such as its valuation and equity which determine the growth and value of the company. The second factor is reach which identifies the audience engagement, frequency of website visits, social share as well as reviews. Lastly, the company has to calculate return on investment of communication strategy through instruments such as conversion rate, profits per customers and customer acquisition cost.
46 Conclusion
This thesis provides the recommendation of communication strategy in the Czech Republic for the Korean skincare company Laneige. Laneige recently entered the European market and have not started to use advertising and promotion to enforce its brand name. The first part describes the theory of marketing, promotion mix and STP. The second part focuses on analysing the strategy. The results were conducted from the primary research which was in the form of electronic surveys and was sent to the local random sample of audience. The overall participants were 82 and questions were designed to find the factors for buying decisions and awareness about Korean skincare. The survey results identified that the target market for Laneige is women from the age of 20 to 40. Laneige was determined as a premium brand and its price is higher but the survey shows that respondents are willing to spend more if the product ensures quality and visible results on skins. Furthermore, the most convincing communication tools for cosmetic users are recommendations, reviews, influencers, and skin specialists. Therefore, Laneige should use mainly invest in public relation because it is the most credible source that increases trust which results in active engagement with the audience and good reputation. For brand awareness, the brand should use advertising through digital marketing such as social media, searching engines and Youtube because these are channels which are most frequently used by the target segment. Overall, with the Amorepacific aim for the global recognition in mind and the communication strategy mentioned above, they could successfully win over the czech market.
47 References
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50 Appendices
Appendix 1: Survey Questions 52 Appendix 2: Annual Calendar of Communication Tools Application 54
51 Appendix 1: Survey Questions 1. What is your gender? Male / Female 2. What country are you from? 3. What is your age? 15-19 / 20-22 / 23-25 / 26-29 / 30-34 / 35-39 / 40-50/ Above 50 4. Are you interested in skin care? Yes / No / Only when I have a skin problém 5. Do you have a skincare routine? Yes / No / Sometimes 6. What kind of products do you usually use during your skincare routine? Cleanser / Toner /Moistrizer / Serum / Eye cream / Sheet mask / Clay mask / Sunscreen / All of the above / None of the above / Other 7. What are your current favorite cosmetic brands? 8. How much do you spend on skincare products monthly on average? Below 500Kč / 500-1000Kč / 1000-2000Kč / 2000-3000Kč / over 3000Kč 9. How much are you willing to spend? Less than I am currently spending / More if the product can guarantee results / The same amount as I am currently spending 10. Have you ever bought a cosmetic product based on its packaging? Yes / No 11. Do you prefer to buy cosmetic products in stores or online shops? Stores / Online / Both 12. Based on what do you choose to buy cosmetic products? Recommendation from someone / Beautician / Dermatologist / Magazines / Bloggers / Youtubers / Adverts on television or internet / Social media such as Instagram, Facebook / Shop assistant / Reviews / Influencers or Celebrities / Samples from shops or events / Popularity/trend / Other 13. Have you ever heard about any Korean cosmetic brands? Yes / No 14. Have you ever used any Korean cosmetic products before? Yes / No 15. If yes, what kind of Korean products did you use? (If no, select click on "None of the above") Cleanser / Toner / Moisturizer / Serum / Eye cream / Sheet mask / Clay mask / Sunscreen / All of the above / None of the above / Other 16. If yes, would you continue using it? (If no, select click on "No, I already haven't tried it before.") Yes / No / No, I already haven't tried it before. 17. If no, would you like to try Korean cosmetics? (If yes, click on "I already have already tried it.") Yes / No / Maybe / I already have already tried it. 18. What kind of Korean products would you like to try? Cleanser / Toner / Moisturizer / Serum / Eye cream / Sheet mask / Clay mask / Sunscreen / Specific products based on skin types - i.e. antiaging, acne prone... / All of the above / Other
52 19. Are you open to trying a new skincare product? Yes / No
53 Appendix 2: Annual Calendar of Communication Tools Application
54